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HMRC internal manual

Lloyd's Manual

HM Revenue & Customs
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Conversion: Limited Liability Partnerships


Limited Liability Partnerships were introduced by the Limited Liability Partnerships Act 2000. BIM72110 contains more details on LLPs (LLM10000). Tax rules on LLPs are in ICTA88/118ZA onwards, and in ITTOIA05/S863.

Lloyd’s admitted LLPs as members with effect from 7 December 2005. The first LLP members of Lloyd’s participated in the 2007 underwriting year.

Tax rules for Lloyd’s LLPs

SI2006/111 amended the 1997 Regulations on SLPs (SI1997/2681 - see LLM6060) so that they apply to ‘Lloyd’s partnerships’, with effect from 14 February 2006. A Lloyd’s partnership is a member of Lloyd’s that is either a SLP or a LLP formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships (Northern Ireland) Act 2002. The 1997 Regulations were renamed the Lloyd’s Underwriters (Partnerships) Tax Regulations.

The effect of the 2006 changes is that the Regulations now apply to Lloyd’s LLPs in the same way that they apply to Lloyd’s SLPs, with the exception of the treatment of ‘earned income’. This in turn means that the normal tax rules that apply to partnerships, subject to the adaptations set out in the Regulations, apply to all Lloyd’s partnerships.

The conversion relief rules in FA93/SCH20A (LLM6160) were also amended (in SI2006/112) so that they apply to LLPs as well as to SLPs, also with effect from 14 February 2006.

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‘Earned income’

‘Under Review’

Loss relief

The rules which limit loss relief of a limited partnership member to the amount of the member’s capital contribution (LLM6090) apply similarly to LLP members. There are further restrictions to limit the amount of loss relief for ‘non-active’ members of LLPs. However, these further restrictions do not apply to the underwriting business of a Lloyd’s Name.

The limit on the amount of sideways relief (ITA07/S64 and ITA07/S72) and capital gains relief (ITA07/S71) introduced by FA07/SCH4/PARA1 as ITA07/S103C does not apply to partners in a partnership which is a member of Lloyd’s - ITA07/S103C (8).

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Tax relief for interest on borrowings

ICTA88/S362 (2)(a) denies tax relief to limited partners in SLPs and members of investment LLPs on interest paid on amounts borrowed to buy into the partnership. Limited partners in Lloyd’s SLPs cannot therefore get tax relief for such interest, but this restriction does not apply to members of Lloyd’s LLPs, which are trading, not investment, LLPs.